The Effect of Digital Financial Inclusion on the Profitability of Jordanian Commercial Banks

Abstract

Purpose — This study examines the relationship between digital financial inclusion (DFI) and the profitability of Jordanian commercial banks, while testing operational efficiency as a transmission mechanism and bank resources as boundary conditions. Design/methodology/approach — The analysis covers 12 Jordanian domestic conventional commercial banks over 2015–2024, yielding 120 bank-year observations. A multidimensional DFI index combines digital access, usage, affordability, and service quality/responsible inclusion. Two-way fixed-effects models are estimated for return on assets (ROA), return on equity (ROE), and net interest margin (NIM). Inference is based on bank-clustered standard errors and is reassessed using a wild-cluster bootstrap. Alternative index constructions, a one-year lag, pandemic-year exclusions, mediation analysis, moderation tests, and functional-form checks are used as robustness procedures. Findings — DFI is positively associated with ROA (β = 0.0065, p = .001), ROE (β = 0.0759, p = .002), and NIM (β = 0.0061, p = .038). A one-standard-deviation increase in DFI corresponds to an increase of approximately 0.13 percentage points in ROA. DFI reduces the cost-to income ratio (β = −0.0924, p = .008) and operating expenses relative to assets (β = −0.0196, p < .001). Operational efficiency partially mediates 37.1% of the total DFI–ROA association. The dimensional results are heterogeneous and weaken when the four dimensions are entered jointly. Capitalization strengthens the DFI–profitability relationship, whereas the interaction with bank size is not statistically significant. Originality/value — The study develops a Jordan-specific bank-level DFI framework that distinguishes access from actual use, affordability, and service quality and integrates direct, mediated, moderated, and robustness evidence in one panel design.